KUALA LUMPUR: Moody’s Investors Service is seeking clarification from the Malaysian government on the offsetting measures to be implemented in its plan to abolish the Goods and Services Tax (GST).

Moody’s Sovereign Risk Group Vice-President/Senior Analyst Anushka Shah said the rating agency viewed plans to abolish the GST as credit negative if implemented without adjusting measures.

“While revenue losses this year will be offset to some degree by higher oil prices, this development is unlikely to be a structural – or act as – a permanent substitute for GST itself.

“The extent to which offsetting measures – if any – will help to recover the revenue loss from GST will allow us to determine the exact impact on Malaysia’s fiscal position, going forward,” she said in a statement yesterday.

However, Anushka added that the elimination of the GST would increase the government’s reliance on oil-related revenue and would also narrow the tax base.

The Finance Ministry said that starting June 1, 2018, the GST would be zero-rated for all goods and services in Malaysia. — Bernama